What to know about Mastro’s empire — how he built it, how it unraveled

The spectacle of an 87-year-old Seattle developer and his wife — owner of a pair of queen-sized diamond rings — being apprehended in the French Alps after leaving behind a flock of American creditors couldn’t help but make international headlines.

But the Michael R. Mastro story is much larger than “The War of the Rings” between the Mastros and a bankruptcy judge.

For a look at how Mastro built his empire, click here (subscription required).

The collapse of Mastro’s real estate empire has had a broad impact in the Puget Sound area and beyond. His deals — totaling $2 billion, he claimed — stretched from a bowling alley in Seattle’s Greenwood neighborhood, to the New York waterfront, to 360 acres in California.

By the time Mastro was forced into involuntary bankruptcy in July 2009, he owed money to more than three dozen community banks, scores of businesses and several hundred “Friends & Family” investors.

In his bankruptcy schedule, Mastro listed $587 million in liabilities and $249 million in assets. That case has spawned dozens of lawsuits and has turned into a cottage industry for Seattle’s legal community.

By the summer of 2011, there were 132 attorneys at 96 law firms representing roughly 100 parties to more than five dozen associated cases.

The banks that loaned Mastro money seized and sold his properties, typically for less than was owed because of the drop in real estate values. Several have since filed additional claims to attempt to recoup the millions still owing. But Mastro’s unsecured creditors have gotten back little more than a penny on the dollar.

The collapse of Mastro’s business empire has had the strongest impact on the Puget Sound area’s Italian-American community. The Italian Club of Seattle lost nearly $140,000 investing with Mastro; a Sons of Italy lodge in Lynnwood lost approximately $183,000, and Seattle’s Italian Community Hall, more than $647,000. Others, such as the Colello family, lost millions.

“He’s not a good guy,” Joe Colello said of Mastro after a hearing early in the bankruptcy.

Another investor at the same meeting leaned over his seat, made his fist into a pretend pistol and joked, “In the old country, we have ways of dealing with a guy like this.”

But Mastro has his supporters, too. They say they made a lot of money with Mastro until the market turned. And they remember his generous donations to community organizations such as Festa Italiana Seattle, which received $10,000 from Mastro every year.

“He was highly regarded for a long time,” said Monte Marchetti, president of the Italian Club of Seattle.